AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of M&C General Insurance Company Limited (M&C General) (St Lucia). The outlook of these Credit Ratings (ratings) is stable.
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The ratings reflect M&C General’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
M&C General’s balance sheet strength reflects its risk-adjusted capitalization, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR) and supported by steady annual surplus growth in excess of dividend payments to shareholders. However, this assessment is offset partially by the company’s relatively small surplus size, asset concentration in regional government debt and high dependence on reinsurance. M&C General paid a sizeable dividend to its parent in March 2023; however, AM Best expects 2023 BCAR to remain at the strongest level albeit decline compared to recent years. The company cedes the majority of its gross premiums to its reinsurance partners in order to manage its catastrophe exposure, protect surplus and minimize earnings volatility. This extensive use of reinsurance is in line with other carriers in the region.
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M&C General’s operating performance historically has been better than average when compared with other Caribbean-based insurers with similar product profiles due to an emphasis on profitable underwriting over premium growth and management’s deep knowledge of the local markets. Constraints in reinsurance capacity in the region are likely to further limit new business opportunities but may provide opportunities for M&C General to improve pricing on its in-force business as reinsurers impose a higher level of rate discipline on competitors. Near term operating performance might be negatively impacted by lower profit commissions from reinsurers, which has been an element of general reduction of capacity in the region. Despite a concentration of risk in St. Lucia’s property and auto segments, the company’s operating performance has not been impacted by severe weather events in recent years.
M&C General is well-established in its domestic market, which is considered highly competitive with limited potential for organic growth given the economy and the company’s focus on underwriting profitability. The company’s ERM program has identified underwriting, investment and operational risks effectively, while also addressing the regulatory and legal environments. Moreover, M&C General’s affiliation with its ultimate parent, Goddard Enterprises Limited, one of the largest Barbados-domiciled conglomerates, affords the company access to financial and investment management and information technology.
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